500 Startups, a global tech startup accelerator and investment program, has launched a $10 million fund today. It’s aimed at businesses that need to ramp up their marketing activity after gaining early traction.
Rather than costing startups a specific amount of equity, the funding will be provided in exchange for market convertible notes, depending on the company and size of the deal, Mat Johnson, ‘distribution hacker’ at 500 Startups told TNW.
The DistroFund will initially invest somewhere between $100,000 and $250,000 in post-seed companies over the next 18 months. Half of the fund will be reserved for investments in companies that then go on to successfully raise a Series A round. Of that initial payment, $50,000 will be put aside for marketing and other associated growth costs. 500 Startups portfolio companies and new firms will be considered for investment.
“There’s a glut of funding available, there’s a glut of late-stage financing, but a roughly constant number of true Series A deals happening,” Johnson said. “There’s a much higher bar, not only for traction but also for operationalizing marketing.”
Essentially, the idea is that the fund can get startups up to speed with marketing, and help them to secure Series A deals more easily by having a proven track-record.
“When you go to make the case to Series A investors that you need five or 10 million dollars and you’re going to dump one million dollars into one of your growth channels this quarter, and two million next quarter you need to feel confident [that it’s the right place]. That’s where we’re starting to see entrepreneurs come to us.”
The first round of funding will go to “companies that we deeply believe could be historic, could be future monopolies, future billion dollar companies,” Johnson said. However, the general focus is for mainstream consumer and B2B SaaS-based operations, so any qualifying company can apply from anywhere in the world.
DistroFund will also be running a series of 1-month ‘Distro Camp’ growth accelerators around the world this year. Exact locations aren’t set in stone, but Johnson said London, the Middle East and Korea are all potentially on the agenda, along with US-based events.